Grocery investors are well aware of the overnight
impact that Amazon.com, Inc. (NASDAQ: AMZN) made in the market when it announced a buyout of Whole Foods Market,
Inc. (NASDAQ: WFM) back in June. However, Amazon’s
intrusion into the food business has been weighing on the food industry for much longer than a few weeks.
News that Amazon will be directly competing with grocery stores hit stocks such as Kroger Co (NYSE: KR) SUPERVALU INC. (NYSE: SVU) and Costco Wholesale Corporation (NASDAQ: COST) like a sledge hammer. Costco shares are down 14.7 percent in the past
month, Supervalu shares are down 20.0 percent and Kroger has tumbled 24.1 percent.
But while grocery investors may just now be wising up to the threat that Amazon poses, other food investors have felt Amazon's
sting for a while now. Amazon first debuted its private-label grocery business back in June 2016 when it launched its own brand of
coffee, baby food, nuts, spices, tea, vitamins and other household items.
Related Link: Where
Do Restaurant Stocks Stand In A World Dominated By Amazon?
Even if Amazon is yet to compete head-to-head with food giants such as Kellogg Company (NYSE: K), Tyson Foods, Inc. (NYSE: TSN), General Mills, Inc. (NYSE: GIS) and Mondelez International Inc (NASDAQ: MDLZ), investors may see the writing on the wall. The S&P 500 is up 16.7
percent since Amazon’s private label launch last year, but shares of each of these food stocks are down between 4 and 25 percent in
that time. Not surprisingly, Amazon shares soared 39.5 percent in that period.
A number of analysts and investors have predicted that Amazon’s Whole Foods purchase will accelerate a food
pricing war that could weigh on margins for food producers, grocery stores and even restaurants.
“It’s becoming clearer that the deflationary headwinds are fundamentally impacted by competitive pricing pressures at this stage
of the cycle,” Pivotal Research analyst Ajay Jain wrote following Kroger’s most recent earnings report, adding that investors
betting on food reflation will likely be “disappointed.”
A decade ago, it may have seemed unfathomable that Amazon and other online competitors could bring U.S. retail stalwarts like
Sears Holdings Corp (NASDAQ: SHLD),
J C Penney Company Inc (NYSE: JCP) and
Macy’s Inc (NYSE: M) to their knees. It’s now up
to investors to decide whether the recent weakness in all the food stocks mentioned above is simply a bump in the road or if it is
the early stages of a similar long-term secular decline in some of the biggest names in the food business.
Latest Ratings for AMZN
Date |
Firm |
Action |
From |
To |
Jul 2017 |
Morgan Stanley |
Maintains |
|
Overweight |
Jul 2017 |
Deutsche Bank |
Maintains |
|
Buy |
Apr 2017 |
Benchmark |
Reiterates |
Buy |
Buy |
View More Analyst Ratings for
AMZN
View the Latest Analyst Ratings
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